Healthy economy buoys car sales, delivers revenue lifeline for cities

Self-driving cars and virtual dashboards may be the future of the automotive industry, but local car dealers are still the bread and butter of area cities.

High-tech Silicon Valley innovation labs established by the likes of Mercedes-Benz, Volkswagen Group and Ford Motor Co. do draw attention to cities that land them. These R&D locations are even starting to attract tier-1 auto suppliers that are opening local outposts.

But it’s the traditional auto dealerships that are key to bankrolling public services with the sales tax revenue they produce.

When the Great Recession hit, cities like Santa Clara felt a significant impact. During the first half of 2009, the city saw a 17 percent decrease in car sales. This directly impacted the city’s general fund, pushing it below $128 million.

San Jose’s return to healthy vehicle sales brought in nearly $9 million in sales tax revenue during first half of 2011, compared to about $8.1 million for 2010.

The city’s two biggest car sales centers — the auto malls at Capitol Expressway and Stevens Creek Boulevard — recorded sales-tax increases of 21 percent and 7 percent, respectively, in 2011, according to Nanci Klein, deputy director of the city’s Office of Economic Development.

Nationwide, 14.4 million light vehicles were sold in 2012, up 13.4 percent from 2011, according to a WardsAuto report. That marks the best year since 2007 when 16.1 million were sold. That was the year before the Great Recession hit and the auto industry tanked at 10.4 million sales in 2009.

“My grandfather had the foresight to buy the land we’re on, so we have very low overhead,” Moore said. “Definitely things are starting to come back, and I think it’s going to keep coming back.”

The economic revival has brought developers and builders back to the automotive showrooms, Moore noted.

“The contractors are buying more trucks and vans,” Moore said, adding that young families are also helping boost sales.

Two of the most popular models currently at his Los Gatos location, especially among younger buyers, are the Buick Enclave and the GMC Acadia, which are crossover SUVs.

Statewide, the hybrid Toyota Prius has been the best selling car for the last two years running.

Moore said Los Gatos has shed more than half of the 11 auto dealers that used to call the city home. Several moved to Capitol Expressway in San Jose, also known as auto row. Others closed down. Just a few remain in Los Gatos, including one ultra high-end Ferrari dealership.

Sunnyvale is currently home to several auto dealers, with plans to add a second high- tech auto R&D tenant.

Nissan Motor Co.’s self-driving car lab set up shop in early 2013, and Mercedes will be in the city come fall.

“You think about the multiplier effect,” said Connie Verceles, economic development director for the city of Sunnyvale.

Moore said tech features like color GPS and smartphone plugins are also helping to fuel his sales recovery. Still, he’s not getting carried away with all the talk of Jetsons-style innovation at nearby R&D shops.

“If you look at all the stuff that might happen, it’s a little overwhelming,” he said.